Nogales reviews preliminary FY2025–26 budget; water fund remains the sole unbalanced department

The Nogales City Council on Wednesday reviewed the proposed fiscal year 2025–26 budget at a study session, hearing that most departments’ proposed spending is balanced but the city’s water enterprise fund is projected to run a deficit. Staff also described several proposed staffing and capital changes and said grant activity will be centralized in the finance office.

Why it matters: The workshop showed the budget largely intact across general government departments while highlighting one clear funding risk — water utility revenues that staff said are too low to support current operations. Council also voted on four routine items at the end of the session, including a budget transfer for fire-suppression work and adoption of cemetery rules.

Finance director Mr. Kramer told the council that the city’s non-departmental reserves grew and that most departments are balanced: “Our reserve can grow every year, and it has grown a large amount this year.” He listed non-departmental expenditures for FY2026 at $17,684,760 and a projected reserve of $12,774,362 — an increase the director described as “very, very good.”

But Mr. Kramer warned that the water enterprise fund is the one account staff could not balance in the preliminary figures. According to staff figures presented at the session, the water fund is roughly $369,280 “in the negative” under current revenue assumptions. To reduce near-term pressure, staff asked council to consider postponing a previously scheduled loan repayment from the general fund and defer one year of the general-fund allocation to the water fund; no final decision on those deferrals was made in the workshop.

City Manager (unnamed in the record) told council the administration will centralize grants in the finance office and contract with a grant-writing firm. He summarized the rationale for the firm’s fee with an example: “If we spend 5,000 to get 5,000,000, that’s why I wanna continue just having the budget there to utilize this company.” Council members asked that any awarded grant and its uses be brought back to the council for approval.

Staff proposed several new or reclassified positions and program moves in the draft budget: a grant coordinator in finance; two water meter readers moved from the water department into finance under revenue; an additional code-enforcement officer in community development; a civil engineer/designer position in engineering; and reclassifying three firefighter/EMT positions to engineer to ensure qualified vehicle operators. Several departments also included capital items: three fire vehicles (first-year lease payment estimated at $964,285), replacement ambulances now arriving after a two-year delay, and work on hydrants (staff cited roughly 63 hydrants out of service and hundreds needing attention).

Council and staff debated a handful of operational costs. Staff said the city currently absorbs about 5% in combined bank and third-party credit-card fees when residents pay by card; staff noted passing those fees to customers would require a council decision and advance public notice. The finance director also described an increase in health-insurance costs, saying the city had moved to full-family coverage in department budgets to avoid budget overruns when employees switch plans.

Other budget highlights and clarifications provided at the workshop: - Community development asked for $55,000 to improve plan-review services and speed business licensing; staff said fees charged to applicants would recoup some of the cost. - Parks and Recreation included $500,000 for a modular building at the recreation center, pool refurbishment, and field repairs; staff also proposed safety netting and dugouts at youth fields. - Library capital includes furniture and final floor work; staff said the county IGA will reimburse roughly 50% of some library costs under the intergovernmental agreement. - Fleet requested $50,000 for trolley maintenance/refurbishment; staff said they will provide a historical account of past trolley expenditures on demand.

Votes at a glance (final actions taken at the meeting): - Order 2025-04-013: Approved a budget transfer not to exceed $120,000 from the general-fund reserve to Facilities for purchase and installation of new fire-suppression equipment at the Nogales Library, Padeludo (Administrative Services) building, Nogales Senior Center and Parks & Rec building (vendor: Johnson Controls Fire Protection). Motion and second were recorded; outcome: approved. - In-kind support for Miguel’s Marathon and health fair (Elgardo Munoz, applicant) on 04/26/2025: motion seconded and approved (in-kind support granted). - In-kind support for Fiesta de Mayo (Cultura committee) at Cairn Park on 05/03/2025: motion seconded and approved (in-kind support granted). - Adoption of city cemetery rules and policies for Parks & Recreation: council approved the rules; staff said the rules can be amended in the future if needed. (Procedural motions: council voted to move into executive session later in the agenda and then adjourned after executive session.)

What council asked for next: Staff committed to return with detailed follow-ups before final budget adoption — specifically, a May study-session update on health-insurance projections, a breakdown of proposed grant-driven revenues, a clear plan for addressing the water fund shortfall (including the effect of any deferred transfers or loan repayments), and a presentation on the plan‑review/business‑licensing process. Staff said the goal is for the council to approve the final budget at the June council meeting.

The session combined department-by-department line-item review with several strategic policy items — centralizing grant administration, addressing aging infrastructure (hydrants, fleet, building systems), and a flagged utility (water) that needs further revenue or cost adjustments before the budget is finalized.